PWT powertel limited

target's statement (pt 1)

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    Earlier tonight, PWT issued its Target Statement (in response to the Roslyndale and TVG offerings).

    Included in the Statement was some updated findings from PWC.

    In reading from the Statement, the following is of interest:

    1)
    The Directors and PWC both favour the Roslyndale offer over that of TVG.

    2)
    PWC emphasises (in its revised IER) that the Roslyndale offer is fairer because it will deliver more cash to PWT. In effect, PWC is saying that PWT will maintain its senior bank debt at existing /higher levels (ie: $78.5m + an increase in facility limits to $90m). Conversely, TVG is proposing a reduction in bank debt to $53.5, and a cap on the continuing facility of $60m. As such, PWC is favouring continuing /higher debt, and criticising any proposal which will offer a lower overall debt outcome.

    3)
    PWC criticises the RCPS rights issue on the basis that it will offer preference on a future dividend earning basis (ie: at the expense of ordinary /continuing shareholders). PWC have also argued that the RCPS issue will be more expensive than bank debt. Wasn't this one of the major contributing factors to the problems that PWT /WilTel originally faced.

    4)
    In favouring higher /continuing debt, PWC is arguing that it is the banking syndicate that should take a debt cut. The problem here though is that the banking syndicate may not be willing to do this (ie: refer PCCW, IP1, and only last week, NextGen).

    5)
    Clearly, the TVG proposal has, as its main focus, the banking syndicate, whereas this is of secondary consideration only, to the Roslyndale Syndicate.

    6)
    PWC argues that the TVG will result in a predominant shareholder position (ie: TVG) with ~/>50% control over the equity (on a fully diluted basis). Conversely, it argues that no single shareholder under the Roslyndale Syndicate's proposal will hold >25% of the fully diluted share capital (refer PWC @p3, or @p31 of Target).

    The problem here, however, is that the Roslyndale Syndicate shareholders will all be deemed under the Corporations Law as associates of each other, meaning that they will each be deemed the associate of the other and, therefore, will each hold 61% of the fully diluted share capital (vs 48% under the TVG proposal).

 
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